Why We Don’t Need and Shouldn’t Want a Public Option

Earlier this year, Senator Patty Murray (D-WA), the chair of the Senate Health, Education, Labor and Pensions Committee, and Congressman Frank Pallone (D-NJ), chairman of the House Energy and Commerce Committee, announced their intent to introduce legislation creating a government-run public health insurance option to compete with private insurers and asked interested organizations to offer perspectives on the issue.  In the Healthcare Leadership Council’s (HLC) written response, I told the lawmakers that a public option “is an unnecessary and potentially damaging policy alternative” that “creates a distorted playing field on which private health plans could not adequately compete.”

But this requires some elaboration.

When Congress debated the Affordable Care Act in 2010, heavy Democratic majorities in the Senate and House rejected the notion of a public option.  Today, the country and Congress are more evenly divided and there is even less reason to make such a significant change to our health coverage system.  We are enjoying exceptional stability in which there has been minimal change in monthly premiums in the individual health insurance market for three consecutive years.  And we shouldn’t forget that 160 million Americans have health insurance provided by their employers, a benefit worth $800 billion annually in personal value to American families.  While there is widespread agreement that we need to continue working toward even greater coverage affordability and accessibility, a public option creates more problems than it solves.

In the HLC response to Senator Murray and Congressman Pallone, I detailed several other likely consequences that would occur if a public option was created:

• A public option offering comparably low, taxpayer-subsidized premiums and reduced out-of-pocket costs would create a scenario in which private plans could not reasonably compete, creating political pressure to make the public option available to all consumers. One study projects this would lead to 123 million people enrolled in the government-run program by 2025, completely destabilizing a private insurance market that – according to a November 2020 Gallup poll – Americans still prefer.
• Patients would likely see decreased access to healthcare providers should a public option come into existence. When Oregon was deliberating the creation of a state public option, an analysis written by President Biden’s administrator of the Centers for Medicare and Medicaid Services (when she was managing director of a health policy analysis firm) found that the public option would likely reduce provider payment rates in order to achieve lower monthly premiums for enrollees.  This would be devastating for hospitals, particularly for smaller rural providers.
• If a goal of the public option is to reduce the number of uninsured in the country, it’s likely to fail. A KNG Health Consulting analysis of the public option concept found that roughly 90 percent of enrollees would be comprised of individuals who were already covered by employers or a commercial non-group plan.  In other words, it would simply erode the already-successful private marketplaces.

As I told the lawmakers, there are better, less disruptive, more patient-centered policy alternatives.  Among them, use premium tax credits and cost-sharing protections to strengthen access to coverage and care for lower-income consumers.  Establish a permanent health reinsurance program to support the cost of care for those with significant medical needs.  Encourage innovation in state Medicaid programs to emphasize whole person and value-based care as well as care coordination.

In other words, we can have a better health coverage system that serves the needs of every American, but the public option concept would make quality healthcare less, not more, accessible.